Buying Land

[Gut Shot]

That is a good point but even in those scenarios, most of the time it won't make sense unless the terms of the financing are favorable or the production is. In our scenario here, the production isn't very favorable so it would require one heck of a financing deal (or not financing any or most of it).

Agreed. In fact, the OP would need quite a large down payment for a bank to even consider going into business with him. I think the guys speculating on how much the land will be worth in X years are looking at this as a personal investment. I'm looking at it as the OP is going into business, the ground is the asset that makes the business money.

 

[ewludwig]

View attachment 367004

Insightful

 

[Shmeegs28]

Hey guys, sorry I haven't been replying been slammed at work but I appreciate all of the insight.

So full transparency (not trying to dig into my personal finances too much), but I would need to finance a good amount of the total price. The overall goal is to buy up some land, form a sort of business entity that I can buy the land under for tax purposes, then start to lease the land to ranchers or farmers. I have also been looking into buying some remote land that i could turn into a sort of recreational property (think glamping, or off grid camping). I understand that putting money into something like this may not bring as much return as say the S&P 500. I contribute to a retirement fund through the military every month and also have a good pool of mutual fund investments outside of that. I am looking to get promoted here soon and will have an extra bit of money to play with so I am looking for other opportunities. The military is not my life-long plan and I am getting out in a few years so I am trying to start something that I enjoy doing before that time comes. I also would like to eventually start or buy a outfitting business that I could then lease private ground from my "land business". I just want to start something that I will enjoy doing for the rest of my life and for me, that is being outdoors and sharing my love of that with others. I am still young (turn 25 on Saturday) so I still have plenty of time but I am just scheming and excited to start building something of my own.

I did not mean to start any head butting but admittedly, I am bright eyed and bushy tailed and was looking for some insight, possibly some humbling, from some of yall that have a little more wisdom than I do. Again I appreciate all of the insight and advice!!

 

[Shmeegs28]

Low risk depends on if you’re financing it or not.

I don’t mean to disparage the OP, but I’m guessing that he doesn’t have $1m cash burning a hole in his pocket with this idea.

You would be correct haha! I have been looking into USDA loans and other financing options to help fund something like this but I really have just been toying with this idea. I know the old adage, "They aren't making anymore land" so I am trying to get into it while I am still young so I have time to accept some risk and also enjoy the property while im young

 

[Shmeegs28]

This would be hard to get it to math out in Colorado unless you found the perfect property with the perfect landowner tag system. Like something in Unit 61 or 76 or someplace like that. Even then it is going to be a very low return. I essentially do this except instead of leasing it out to others I use it for my own recreation and while it technically doesn't cost me anything I'm not sure that it makes me anything either.

If you just want to boil it down to math I would be better off taking that same amount of $ and investing it and using the earnings from it to go on a hunt somewhere every year. Somehow in my mind I can justify owning the property but I have a hard time justifying going on a guided hunt.

I agree with you, For some reason hiring a guide leaves a bad taste in my mouth so if I could have some land of my own to hunt that would be the dream

 

[Shmeegs28]

It doesn't need to pay the mortgage. It needs to pay the interest on that mortgage and that will depend on each individual and how much capital they are willing to start with. Remember, this is about investment talk so ideally you are paying for this up front with cash and you have zero mortgage.

I would have a mortgage if i decide to buy some property, but I am not expecting leasing that land out to pay all my bills. I would ideally use this property to diversify/ add a couple income streams but would also use them for my own enjoyment as well. Im not planning on holding onto these properties for 30-40 years, just thinking of options that could potentially make me a bit of extra money in the short-term. Sort of a "side-hustle" if you will while I am transitioning out of the military. And if it blows up and becomes something I could potentially do for the rest of my life then even better

 

[seeth07]

@Shmeegs28 what is your budget? As already pointed out, for this to even remotely work as a business model you need to have the capital up front with minimal financing. Even then, the business would not be turning out any sort of meaning full "dividends" on a yearly basis to allow you to reinvest but rather the business would be banking on appreciation and resell value to make its money.

It sounds more like you are looking to do this at a personal investment level and you don't need to bother digging into this as a business. Land is not a bad investment and a great way to diversify your portfolio. You can still rent it out and make a little bit of money on it.

 

[Forkyfinder]

@Shmeegs28 what is your budget? As already pointed out, for this to even remotely work as a business model you need to have the capital up front with minimal financing. Even then, the business would not be turning out any sort of meaning full "dividends" on a yearly basis to allow you to reinvest but rather the business would be banking on appreciation and resell value to make its money.

It sounds more like you are looking to do this at a personal investment level and you don't need to bother digging into this as a business. Land is not a bad investment and a great way to diversify your portfolio. You can still rent it out and make a little bit of money on it.

All depends on the grants/loans he can get from the USDA too.

 

[Shmeegs28]

@Shmeegs28 what is your budget? As already pointed out, for this to even remotely work as a business model you need to have the capital up front with minimal financing. Even then, the business would not be turning out any sort of meaning full "dividends" on a yearly basis to allow you to reinvest but rather the business would be banking on appreciation and resell value to make its money.

It sounds more like you are looking to do this at a personal investment level and you don't need to bother digging into this as a business. Land is not a bad investment and a great way to diversify your portfolio. You can still rent it out and make a little bit of money on it.

It depends on what I could swing for USDA loans or grants but realistically around 150k. I should have enough saved up in a few months to put a good chunk down on it

 

[Treeshark]

What’s the plan to make the monthly payments on the land?
Leasing/grazing etc might pay the property tax, but it won’t cover the mortgage payments.

Do you own a house or rent currently?

I don’t mean to nitpick, but if you go to a bank for a business loan they are going to ask for a business plan that answers all of these questions (personal loan officer will ask them too).

 

[Shmeegs28]

I have enough disposable income every month from my day job that would help cover the difference

 

[Pagosa]

Unless your going to be onsite to take of the property and pay a large amount down I wouldn't recommend it. Land maintenance is a full time job and no leasee is going to take care of your land. It's basically a full time job and then some for larger parcels. Even the guys that inherent large ranches barely make a good profit in most years. Grain farming is a different thing. Best of luck

 

[seeth07]

Unless your going to be onsite to take of the property and pay a large amount down I wouldn't recommend it. Land maintenance is a full time job and no leasee is going to take care of your land. It's basically a full time job and then some for larger parcels. Even the guys that inherent large ranches barely make a good profit in most years. Grain farming is a different thing. Best of luck

That isn't really true for his capital investment of only 150k. He is looking at buying something in the 10 to 100 acre range which isn't much. I thought we were looking at something here in the 1 to 5 million range. This guy really is just looking for a personal recreation property, not a business.

 

[Shmeegs28]

That isn't really true for his capital investment of only 150k. He is looking at buying something in the 10 to 100 acre range which isn't much. I thought we were looking at something here in the 1 to 5 million range. This guy really is just looking for a personal recreation property, not a business.

Right, Im not looking for something massive right now. Something close to where I am living now that I can disappear to on the weekends and let the dog run. Maybe shoot an antelope or Muley now and then. And if I could find a way to make a little bit of cash from it, even better. I am really just playing with the idea of some sort of "business" with this but that is down the road a bit

 

[seeth07]

Right, Im not looking for something massive right now. Something close to where I am living now that I can disappear to on the weekends and let the dog run. Maybe shoot an antelope or Muley now and then. And if I could find a way to make a little bit of cash from it, even better. I am really just playing with the idea of some sort of "business" with this but that is down the road a bit

You need to get it out of your head that this will be short term profitable. You very well may lose money short term depending on your interest rate/amount and if property expenses are required to generate any sort of income

 

[Pagosa]

Right, Im not looking for something massive right now. Something close to where I am living now that I can disappear to on the weekends and let the dog run. Maybe shoot an antelope or Muley now and then. And if I could find a way to make a little bit of cash from it, even better. I am really just playing with the idea of some sort of "business" with this but that is down the road a bit

That makes sense. I thought you were wanting to buy multiple properties and do a ag/hunting leaee. Taking of 10-50 acres is pretty straightforward, not like owning a section

 

[Shmeegs28]

That makes sense. I thought you were wanting to buy multiple properties and do a ag/hunting leaee. Taking of 10-50 acres is pretty straightforward, not like owning a section

Nope, just looking to get my feet wet with a smaller property and hold onto it for awhile

 

[Pagosa]

You will do fine, I wouldn't think twice about a smaller property

 

[npaden]

I sure wish I had figured out a way to make a land purchase work for me at that age. I remember looking at properties back in the 1990s for just $200 to $300 an acre that are about 10 times that price now.

I've bought a lot of land and haven't ever looked back and said that I wish I hadn't bought any of it. I've passed on buying a few pieces that came up for sale and have regretted nearly every one of those passed opportunities.

Of course I'm a sucker for land. I was surprised when I was doing some financial planning the other day to find out that my real estate holdings are worth more than my 401k and all my other investments.

Lot of worse things to spend money on.

Don't expect it to have quite the returns that you could get in the stock market, but it is a LOT more enjoyable to play around on than it is to own stocks.

 

[Shmeegs28]

I sure wish I had figured out a way to make a land purchase work for me at that age. I remember looking at properties back in the 1990s for just $200 to $300 an acre that are about 10 times that price now.

I've bought a lot of land and haven't ever looked back and said that I wish I hadn't bought any of it. I've passed on buying a few pieces that came up for sale and have regretted nearly every one of those passed opportunities.

Of course I'm a sucker for land. I was surprised when I was doing some financial planning the other day to find out that my real estate holdings are worth more than my 401k and all my other investments.

Lot of worse things to spend money on.

Don't expect it to have quite the returns that you could get in the stock market, but it is a LOT more enjoyable to play around on than it is to own stocks.

I know I would love it and itd be great in the long-term I just dont want to make myself "land-poor" haha! I bought a house with a VA assumption last year and got it with under a 3% interest rate but had to throw majority of my outside investments at it for the down payment to cover the equity but it has already increased in value by about 10-20k. They are developing like crazy out where I live and there is a few properties for sale out near where I am that I know some big home builder would pay a pretty penny for someday. Im just struggling with the thought of buying raw land only to sell it 10, 20, 30 years down the road and see a bunch of houses get thrown on it.